BIG FED RATE CUT! Will it Help Borrowers? Calm Financial Markets?

By
Real Estate Agent with Dean's Team - Keller Williams Realty Partners Chicago IL

In a dramatic move, the U.S. Federal Reserve Board cut its benchmark Fed Funds rate 3/4 percent today, to 3.50%.   It also dropped the Discount Rate to 4.00% - 0.75% as well.

As we know from recent press, the Fed price reduction was anticipated - at the end of the month, and at their next regularly scheduled meeting.  But the emergency move today comes in reaction to huge selloffs in foreign equity markets, built on fears of a recession here in the U.S.  Considerable volatility, and perhaps a substantial early NYSE selloff, had been predicted this morning - as Dow stock futures dropped as many as 500 points before this morning's opening bell on Wall Street.

Will the Fed move reduce home mortgage rates?  Perhaps - but, recently, 30-year rates have dropped somewhat, in anticipation of a 50 basis point Fed move later in the month.  Also, many adjustable loans are tied to the international LIBOR rate, and these rate adjustments will not be impacted unless this international index moves in tandem.

Let's see what happens . . .

Read extensive coverage in today's Wall Street Journal.  Our Team also covers recent mortgage rate trends in our Chicago IL Real Estate Stats Pack via BlogChicagoHomes.com.

DEAN & DEAN'S TEAM CHICAGO 

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Ambassador
876,211
Larry Bettag
Regional Vice-President
Larry Bettag - Cherry Creek Mortgage
It'll help borrowers, not sure that it will calm the market....that will only be known in the long run.
January 22, 2008 08:40 AM
Rainmaker
1,389,218
Tom Braatz
Waukesha County Realtor Real Estate agent,Waukesha
Re/Max Realty Center 262-377-1459

Dean

I think the market is going to get better. Everything helps

Your Wisconsin friend.

Tom Braatz

January 22, 2008 08:41 AM
Rainer
16,878
Felix Hung
Your Real Estate Consultant For Life. Serving South Bay
ESQUIRE

Yay!  I think it's  a good thing for our industry.  I do also think this will just be a temporary fix and if nothing else is done, we will still have a recession looming very soon.  In the meantime, I think we'll see more buyer's out - NAR is doing some great campaigns right now. 

January 22, 2008 08:44 AM
Rainmaker
138,230
Paige Rausch
Boback Commercial Group

In my novice opinion, there's one reason and one reason only that the Fed took this move, and it's the plunge in global stock markets on Monday, along with indications that the U.S. markets were set to follow suit.

Now the Fed is charged with keeping employment high and inflation low; it's not charged with protecting the capital of investors in the stock market. So this action smells a bit like panic to me, and it might also have prevented the kind of stomach-lurching selling which could conceivably have marked a market bottom. I have to say I don't like it.

 

 

January 22, 2008 08:54 AM
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Rainmaker
362,833

Dean Moss

Dean's Team Chicago IL Real Estate Team
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